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Uruguay has long marketed its beef as hormone-free, traceable and largely fattened on vast grasslands. | Bloomberg/James MacDonald

A weak currency and cheap cattle will make Argentina a significant competitor to Uruguay in global beef markets through the end of next year, according to a senior industry executive.

Uruguayan ranchers and packers saddled with costly energy and labour and a shortage of cattle have responded by lifting productivity, said Daniel de Mattos, chief executive officer of Breeders & Packers Uruguay, a unit of NH Foods Ltd.

“Uruguay is becoming competitive in a tough environment of high costs and lower cattle availability, while Argentina and to some extent Brazil are exploiting the exchange rate,” De Mattos said in an interview at the company’s plant in Durazno province.

Productivity gains should give Uruguay the upper hand in price and quality when Argentina loses its exchange rate advantage, he said. The Argentine peso has lost 34 percent of its value against the US dollar this year amid a crises of confidence sparked by the prospect of a return to protectionism. Uruguay’s peso is down 12 percent.

Beef is Uruguay’s top export by value, with shipments rising six percent to US$1.27 billion through mid-September, although volumes have barely risen. The cattle herd fell to an eight-year low of just under 11.2 million at end June after years of rising slaughter and the shipment of hundreds of thousands of animals to Middle Eastern meatpacking plants since 2015.

De Mattos is optimistic the herd can grow to as many as 12.5 million head in five years if ranchers manage to lower costs and increase the number of calves. Uruguay has an opportunity to not only rebuild its cattle stocks but also increase the percentage of animals earmarked for slaughter or live export to as much as 28 percent of the herd from almost 24 percent today, he said.

A tight cattle market hasn’t kept Uruguay from cashing in on China’s demand for South American beef after an outbreak of African swine fever decimated its hog herd. China bought 64 percent of the more than 338,000 metric tons of beef by carcass weight that Uruguay shipped abroad so far this year, up from 49 percent in the same period of 2018, according to data compiled by the National Meat Agency.

China probably will be a major buyer of Uruguayan beef at good prices until at least 2023, said De Mattos, who runs the country’s number two meatpacking plant by slaughter.

Uruguay has long marketed its beef as hormone-free, traceable and largely fattened on vast grasslands that also serve as a carbon sink. De Mattos thinks the government and beef industry should be more aggressive in promoting Uruguay as a sustainable producer amid the international outcry over forest fires in the Amazon.

“We don’t have to burn any trees to grow cattle,” he said. “On any piece of native grassland in Uruguay you have more than 200 species.”